The school year is nearing an end for student all across the country and whether it is summer school or an entry level career job, millions of new employees will begin to enter the work force. If you are a working student yourself, or a parent of a child looking to get their first summer job, you might be concerned about the tax implications of being an employee. I have put together the following list of tax tips—let’s call it taxes 101 for wage earners—specifically for students working a summer job.
You will Need to Complete a W-4 Form
Whenever you start a new job you required to complete an IRS Form W-4, which essentially tells your employer the amount of tax to withhold from your paycheck. If you are not sure about what filing status you should claim or the number of exemptions to take, check out the withholding calculator on IRS.gov. At the start of a new job, you will also need to provide a government issued form of identification such as a driver’s license and proof of your social security number.
Tips and Odd Jobs are Taxable Income
If you work as a waiter, or any other position where you receive tips, you will need to report this money on your tax return. According to the IRS, all income from tips is subject to the federal income tax. Additionally, earnings from odd jobs such as house sitting, baby sitting, or mowing your neighbor’s lawn, are also subject to federal taxes.
Wages Paid Under the Table
Some employers will offer to pay students’ wages under the table – meaning they will not report the income to the IRS or withhold any taxes. However, it is your legal responsibility to claim this income on your federal tax return, regardless of whether or not the employer sends you a W-2 Form.
$400 or More Rule
If you earn $400 or more from any form of self-employment then you will have to pay self-employment tax on the income. This tax goes to Social Security and Medicare, which are usually taxes that are withheld from a wage earners paycheck. You will need to include your income, and calculate your self-employment tax on Schedule SE of your next IRS Form 1040.
Special Tax Laws for Newspaper Deliverers
There are a handful of special rules that apply to newspaper carriers or distributors. Technically, the IRS will treat you like a self-employed taxpayer as long as you meet the following conditions:
- You are in the business of distributing newspapers
- The pay you receive is related to your sales as opposed to the number of hours worked
- The distribution services are performed under a written agreement stating that you are not to be treated as a wage-earning employee in regards to federal taxes.
On a related note, children under the age of 18 working in the newspaper delivery business are not usually subject to the federal self-employment tax.